Former FTX CEO Sam Bankman-Fried has concluded the testimony and cross-examination portion of his ongoing criminal case, Bloomberg reported on Oct. 31.
Bankman-Fried acknowledged the existence of an $8 billion hidden debt within Alameda Research, which came to light after a bug was fixed in an account known as fiat@. Despite his claims of discovering the massive transfer around September or October 2022, Bankman-Fried said he did not identify any particular employee as responsible and made no personnel changes based on this issue.
$8 billion bug
Bankman-Fried testified on Alameda’s $8 billion hidden debt. That debt was obscured by a bug in an account labeled fiat@ until FTX employee Adam Yedida resolved the bug.
Following his earlier claim that he had learned of the $8 billion transfer by September or October 2022, Bankman-Fried testified that he did not know of any particular employee responsible and said that he didn’t fire anyone in response. He denied making certain decisions, more broadly, said and did not inquire more deeply into the bug.
One exchange went as follows:
Bankman-Fried: “I was told that [employees] were busy and that I should stop acting questions because it was distracting.”
Sassoon: “Is it your testimony that your supervisees told you to stop asking questions?”
Bankman-Fried: “Yeah, and I agreed with them.”
Sassoon later asked Bankman-Fried whether he hid the risks of Alameda’s use of customer funds from FTX users before November 2022. Bankman-Fried disagreed but admitted that he provided more information to customers after FTX’s bankruptcy.
Finally, Sassoon raised the various assurances that Bankman-Fried tweeted before the company’s collapse. Bankman-Fried admitted that he had tweeted that the company does not invest in client assets — apparently contradicting reality.
Redirect shines more light on details
After Sassoon’s cross-examination concluded, Bankman-Fried addressed the matter further in redirect. Bankman-Fried said:
“The entirety of the liability Alameda had to FTX was about the size of the fiat@ account … That was what myself and most of us had not been aware of in 2022, that roughly $8 billion liability.”
He concluded that his companies would have had better systems in place to monitor the @fiat account if Alameda and FTX were not involved with each other. He called the company’s oversight of the matter “very poor” in hindsight.
Misleading spreadsheet
Bankman-Fried also commented on a falsified balance spreadsheet. The spreadsheet in question had eight tabs containing alternate versions meant to obscure the degree of exposure to external lending companies such as Genesis.
Bankman-Fried suggested that Caroline Ellison — then the CEO of Alameda Research — had merely sent him the spreadsheet and asked for his opinion. He testified that, at the time, he told her that the spreadsheet looked “reasonable.” Bankman-Fried suggested that multi-tabbed spreadsheets are not unusual but said that he did not remember if he reviewed all those tabs on the spreadsheet in question.
Those statements may or may not shift the blame: Ellison testified that Bankman-Fried had told her to create “alternative ways of presenting” the financial situation. She said that she understood this as an instruction to conceal information in the balance sheets.
Bankman-Fried’s testimony has now concluded. Reports from Bloomberg indicate that the court will next hold a charge conference, which will set out instructions for the jury.